Palo Alto officials expect budget woes, green momentum in 2010

Depending on whom you ask, 2010 will either be a year of painful adjustments in Palo Alto or a time of unprecedented opportunities.

For members of the City Council, it promises to be a bit of both.

With the city facing a structural budget deficit of about $10 million and just about every major revenue source on the wane, city officials are bracing for service cuts, tough negotiations with labor unions and a growing infrastructure backlog.

The city's quest for new police headquarters has stalled and is back to square one; its largest labor union is reporting a crisis of morale; and downtown's vacancy rate is hovering around double digits for the first time in recent memory.

But city officials also told the Weekly they have reasons for optimism. After a disastrous 2009, business leaders expect some of the empty buildings on University Avenue to start filling up in early 2010. Palo Alto expects to make significant progress in the coming year on rebuilding its libraries at bargain-basement construction prices. City Council members also hope that some of the green initiatives the city has recently undertaken will bring both environmental and economic benefits to the city.

"There's both an uncertain future ahead and a window of opportunity," Mayor Peter Drekmeier said. "We've got great resources, great minds and people who are very dedicated to helping out, which could be a huge boost."

Drekmeier, who is concluding his council term this month along with council members Yoriko Kishimoto, Jack Morton and John Barton, said he expects budget issues to dominate council agendas throughout 2010. This includes negotiations with the Service Employees International Union, which represents 617 city workers.

On Jan. 11 — just three months after the council unilaterally imposed new conditions on SEIU employees — negotiations between the two sides are set to resume.

Councilman Pat Burt said the council also plans to re-evaluate the entire government structure in the coming year.

"We're going to look at the whole city government and ask if there are any ways in which we can run more efficiently," Burt said.

Other cuts will stretch far beyond City Hall and could prove more painful for the average resident. The city is facing a $5.4 million gap in the 2010 fiscal year, which ends on June 30. So far, city officials have transferred money from reserve funds, withdrew funds from the Public Safety Building project and made other one-time, under-the-radar adjustments to close the gap.

But City Manger James Keene said closing future gaps would almost certainly involve elimination of some programs and services.

"We're really at the end of the line as far as shuffling things around and making cuts that don't require a serious prioritization of our programs," Keene said. "This is not a year where there's going to be opportunities to say, 'Yes,' to people a lot."

The council's Finance Committee has already identified several programs that may be on the chopping block if the budget picture worsens. These include the Fire Department's emergency-preparation program, the Police Department's community-outreach services and the city's shuttle service. The list may change or expand in 2010, when new council members Karen Holman, Gail Price, Nancy Shepherd and Greg Scharff bring their own views and priorities to the dais.

If there is a positive aspect of the economic downturn, it's lower construction costs, Drekmeier said. With Palo Alto preparing to rebuild its libraries, expand the Art Center and upgrade the streetscape along California Avenue, city officials have been heartened by the lower bids they've been receiving for the various capital projects.

"Capital projects can now be done much cheaper," Drekmeier said. "We're seeing a lot of bids 30 percent lower than expected, so this could be a good time to move forward with those projects."

Keene said the city's Administrative Services Department is now considering other infrastructure and maintenance projects to take advantage of the lower construction costs.

While the Public Works Department coordinates the city's multitude of infrastructural projects in 2010, city planners and the City Council will be spending large chunks of the year debating the city's long-term future. Palo Alto's upgrade of its Comprehensive Plan — the city's land-use bible — is scheduled to accelerate in February when the council and the Planning and Transportation Commission meet to discuss the $850,000 revision effort.

Burt, a former planning commissioner, said the upgrade is critical because it will dictate the city's approach toward building new housing and protecting residents' quality of life. Keene said the revision process would help city officials make long-term choices about the future of Palo Alto.

The council also plans to spend much of the coming year struggling with another big-ticket land-use issue: Stanford University Medical Center's $3.5 billion expansion of its hospital facilities, which would bring 1.3 million square feet of new development to the city. The city's long-awaited environmental review for the project is scheduled to be released in March.

That's also when negotiations between Stanford and Palo Alto over a development agreement are expected to heat up, since the project far exceeds what the city's zoning-code allows.

"It's a project of such a scale that it's transformational," Kishimoto said at a Dec. 7 discussion on the Stanford expansions. "The challenge is, how do you make it into a project that's transformational in a positive way, rather than a negative way?"

So far, the two sides remain at odds over the "public benefits" Stanford should be required to provide to get the city's permission for the project. Keene predicted at the Dec. 7 meeting that the release of the environmental study in March should help the two sides resolve these issues.

"It's safe to say, we mutually recognize that moving the discussion through an eventual resolution can't effectively take place until the Draft Environmental Impact Report is out," Keene said.

The new year will also force city officials to grapple with an assortment of hold-over issues from 2009.

California's proposed high-speed-rail system, which would pass through Palo Alto, will continue to dominate public hearings in Palo Alto throughout 2010. The city's debate over the future of composting is scheduled to resume in February, when the City Council considers whether it's feasible to build a new waste-to-energy facility. Residents around California Avenue will have a chance to express their views about the city's streetscape improvements in the summer, when the city plans to replace street furniture and change the lane alignments on the busy street.

The word "green" will also likely continue to dominate the council lexicon. Burt said he'd like to see the city put together a "master plan" for the city's panoply of environmental initiatives — a document that could both coordinate the city's environmental policies and showcase the city to outsiders as a leader in the field.

The city's leadership on green issues has already attracted great attention from other cities, states and nations, Burt said, and was the main reason the U.S.-China Green Energy Council chose Palo Alto as the host city for its annual forum in October 2009. Stanford University and businesses such as Tesla Motors (which announced its move to Palo Alto in April) and Better Place further reinforce this image, he said.

The city's environmental leadership, he said, may be the key to attracting new businesses to Palo Alto and promoting economic growth in a year filled with financial anxieties.

"We don't have to start any new programs, but we need to continue our momentum in this arena and tie it with economic benefits in our community," Burt said.

Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com.

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